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By Mel Duvall
IBM has sealed a deal to acquire predictive analytics and data mining software company SPSS Inc. for $1.2 billion in cash. The acquisition provides IBM with a window into a fast-growing market for software that helps companies analyze data and make predictions.
Chicago-based SPSS was founded in 1968 and now has about 1,200 employees in 60 countries. Its software is used by customers in a wide range of industries including government, insurance, education, retail, and banking, and it achieved $303 million in revenues in 2008.
The all-cash deal values SPSS shares at $50, a 42% premium to their closing price on Monday.
In announcing the deal IBM said it is expanding its focus on business analytics to meet growing client needs to cut costs, reduce risk and increase profitability. Research firm IDC estimates that the worldwide market for business analytics software will grow to $25 billion in 2009, a 4% gain over 2008.
"With this acquisition, we are extending our capabilities around a new level of analytics that not only provides clients with greater insight - but true foresight," IBM General Manager of Information Management Ambuj Goyal said in a statement. "Predictive analytics can help clients move beyond the 'sense and respond' mode, which can leave blind spots for strategic information in today's fast paced environment -- to 'predict and act' for improved business outcomes."
Business analytics is a rapidly evolving technology which aims to give companies the ability to forecast future trends and spot shifts in consumer patterns or behavior. Companies are using the technology to help reduce credit risk, increase customer loyalty, detect and prevent fraud, and to figure out who are their most profitable customers.
Beyond business, a wide range of government and educational institutions are also putting the technology to work. Police departments, for example are using SPSS' software to analyze daily crime reports and predict patterns of criminal behavior. The Richmond, Va. police department says it was able to achieve a 20-30% decrease in violent crime and homicides in a 12-month period using the technology.
IBM said once the acquisition has closed it will integrate SPSS' products into its Information Management software portfolio. Separately, IBM also said it closed a deal to acquire privately-held Ounce Labs, a company which makes security and compliance software. Terms were not released.
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